Walmart Outsourcing Depresses Wages In U.S. Warehouses: Report

First Posted: 06/06/12 11:41 AM ETUpdated: 06/06/12 12:41 PM ET

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Walmart, the world's largest retailer, has driven down wages in its retail supply chain by outsourcing jobs in American warehouses, according to a report issued Wednesday by a low-wage workers advocacy group.

The report, from the National Employment Law Project (NELP), said that Walmart's famously low prices carry a hidden cost for the workers employed in the company's distribution centers throughout the U.S.

Although these workers handle Walmart goods, many of them technically work for subcontracted "logistics" companies and temp firms, where wages are low and labor law violations are common, the group said.

"Contracting out is becoming increasingly common in many of the nation's largest and fastest-growing industries," the report stated. "These outsourced workers laboring on Walmart's behalf toil at the bottom of a complex hierarchy of intermediaries and in alternative employment schemes that leave them vulnerable to significant worker rights abuses and unsure where to seek redress."

A Walmart spokesman could not immediately be reached for comment on the report.

As The Huffington Post has previously reported, such outsourcing has become common practice in many of the nation's major distribution hubs, such as the greater Joliet region of Illinois or the Inland Empire region of Southern California.

Workers at the bottom of the supply chain tend to work physically demanding jobs, often moving boxes and pallets on and off of trucks throughout the day. Despite the strenuous workload, many of them work for little more than the minimum wage and don't receive benefits like health care coverage or vacation days. The prevalance of temp work also means that many warehouse employees work on a day-to-day basis with little job security.

According to NELP, a non-profit closely aligned with labor groups critical of Walmart's practices, the subcontracting has helped lead to "rampant wage and overtime and health and safety violations," many of which have been detailed in class-action lawsuits and citations from government labor officials. Workers employed at Walmart-contracted facilities in both Illinois and California have sued their employers in recent years, claiming the contractors have cheated them out of pay and violated minimum wage laws.

Walmart itself has not been named in any such suits.

Unions are now trying to organize distribution workers in Joliet and Southern California, but the complex contracting arrangements have created a highly splintered workforce, making unionization difficult. One labor group advocating for the workers in California, Warehouse Workers United, said the report issued Wednesday highlighted many of the struggles faced particularly by Latino warehouse employees in the area.

"Walmart figured out how to shift the burden off the retailer and move economic risks lower down the supply chain ultimately to a low-paid, mostly Latino workforce," said Guadalupe Palma, the group's campaign director. "Changing this industry means creating thousands of good jobs and improving the quality of life in Southern California."

Retail is hardly the only industry that utilizes subcontracting and temp agencies to handle its less-glamorous work. Low-wage foreign guestworkers walked out of a Hershey chocolate plant en masse in Pennsylvania last year, claiming to be subjected to abusive working conditions. The workers had been employed by a temp labor supplier twice removed from the storied chocolate company. And even hoteliers like Hyatt have shifted some traditionally in-house jobs such as housekeeping to outside temp agencies, which generally pay lower wages and don't offer benefits.